Contract Performance Bank Guarantee Template for Germany

The Contract Performance Bank Guarantee is a fundamental security instrument in German commercial practice, particularly vital in high-value contracts where parties seek financial assurance of performance. This document is typically required when a contractor undertakes significant projects or supplies valuable goods/services, with the bank guaranteeing their performance obligations. Under German law, these guarantees are structured as independent payment obligations (selbstständige Zahlungsversprechen) or as sureties (Bürgschaft), with specific requirements under the German Civil Code (BGB) and banking regulations. The guarantee amount usually ranges from 5% to 10% of the contract value and remains effective until the successful completion of the guaranteed obligations. This instrument is particularly important in international trade and domestic commercial contracts where the beneficiary requires security against contractor default or non-performance.

1. Parties: Identification of the Guarantor (Bank), the Principal (Contractor), and the Beneficiary (Client)

2. Background: Reference to the underlying contract being guaranteed, including contract date, parties, and subject matter

3. Definitions: Key terms used in the guarantee, including 'Guaranteed Amount', 'Expiry Date', and 'Demand'

4. Guarantee: Core guarantee commitment, specifying the maximum amount and nature of the bank's obligation

5. Conditions for Payment: Requirements and procedures for making a valid demand under the guarantee

6. Duration and Expiry: Validity period of the guarantee, including start date, expiry date, and any extension provisions

7. Form of Demand: Specified format and content requirements for making a valid demand under the guarantee

8. Payment Terms: Timeline and method for payment upon receipt of a valid demand

9. Reduction and Release: Circumstances under which the guarantee amount may be reduced or the guarantee released

10. Governing Law and Jurisdiction: Specification of German law as governing law and designation of competent courts